The World Bank has just released a ‘concept note’ for its 2019 World Development Report (WDR), which is going to be about ‘The Changing Nature of Work’. The WDR is the Bank’s flagship research and policy publication. Every year it chooses some development-related topic and produces what’s intended to be a headline-grabbing report on it. This has been going on since 1978. Topics have included everything from conflict to climate change to education to finance. Work is one of the few subjects to have been a theme of the WDR more than once. Unfortunately, it’s also the subject about which the Bank is most frequently on the wrong side of the argument.


World Bank President Jim Kim

Why 2019?

The first question that springs to mind is why the Bank chose 2019 to produce a report on work. 2019 is the 100th anniversary year of the International Labour Organization (ILO), the UN agency whose role is to develop international policy on work and employment. Not surprisingly, the ILO is intending to publish a major report to mark the occasion, and it’s going to be on ‘The Future of Work’. So what do we make of this? Maybe the Bank just didn’t know it was the 100th anniversary of the ILO and that the Future of Work project was going on. If this is the case it really hasn’t got its eye on the ball. The Future of Work project is the highest profile policy discussion initiative the ILO has taken in years. The alternative is that it did know and decided to produce a headline report about work and employment anyway. This is at best not very friendly. Surely a diplomatic silence on the topic was the least the Bank could have managed out of simple respect for the prerogatives of a fellow UN agency (yes, the Bank is a UN specialized agency, although it doesn’t like to talk that up).

The Unchanging Nature of the Bank’s Problem with Unions

The niceties of UN protocol aside, the concept note for the 2019 WDR—a preliminary outline of the report that gives the main areas for discussion and a summary of the overall argument—shows that although the nature of work may be changing, the Bank’s attitude to labour isn’t. Just to be clear, there are many decent people who work in the Bank. It is not the home of any grand conspiracy to stomp on organized labour. We’re not talking about the Koch brothers here. The problem is that the Bank’s staff are so mesmerized by their own economic models that they are incapable of recognizing that there are other ways of looking at the problem. They simply can’t process any evidence that puts their basic explanatory frameworks in question.

So what are these explanatory frameworks? Well, the Bank approaches work and employment on the basis of orthodox neoclassical labour market economics. We don’t need to get very technical to explain the main problems with this way of thinking. Orthodox economists assume that the employment relationship is a contract between two individuals, one who needs labour and one who has it to sell. They also assume that these two individuals have equal power in the labour market. These two basic assumptions are the basis of all the models and calculations and statistics and ‘evidence’ that is used to argue that collective bargaining of employment contracts is economically damaging while individual bargaining isn’t.

Now, the sharper-eyed among you may already have spotted the problem. The basic assumptions of the Bank’s conventional labour market economics are not true. And they are untrue not in the trivial sense of being stylised facts intended to simplify a situation by glossing over some of the details. They are untrue in the sense of being a fundamentally inaccurate account of the actual situation. The Bank’s analytic approach does not recognize that there is any difference in power between individuals and corporations. What’s more, it cannot conceive of collective worker action in the labour market as something normal. There is no means of including it as an ordinary part of how the economy works—it is anomalous by definition. The same goes for regulation. Anything that conceivably gets in the way of a market relationship is an intrusion, a ‘rigidity’ that stops the smooth adjustment of supply and demand. No matter how often the Bank repeats that it respects workers’ rights to organize and act collectively, its seemingly unbreakable adherence to conventional labour market economics means that it can’t help but see the exercise of these rights on anything more than a very limited scale as damaging to growth and competitiveness.

Sometimes this contradiction works itself out in some truly bizarre policy positions. In the 1995 WDR, ‘Workers in an Integrating World’, the Bank twisted itself up in knots to such an extent that it ended up arguing that a good way to ensure that unionization and collective bargaining don’t have too damaging an effect on the economy is to ensure that there is also an unregulated nonunion sector that can “exert discipline on the monopolistic wage practices of unionism” (pp82-3). And then of course there were the notorious ‘Doing Business’ indicators, that awarded countries more league table points the lower the level of labour market protection they gave to workers (see here).

The 2019 WDR Concept Note

Even on a quick reading it is obvious that the concept note for the 2019 WDR is based on the same tired old nonsense. It is also written in jargon that is not only irritating but also hides the real meaning of the argument behind language designed to give the paper a veneer of technical neutrality. The report is 64 pages long and we can’t deal with all of it, so these are only a few brief comments. Still, they give a flavour of what the Bank is peddling.

The concept note asks: “What is the “right” balance between adequacy of benefits versus incentives to work?” (Para 91). But why does the Bank simply assume that benefits systems have to be a tool of labour market policy? Benefits systems should be designed so that every person has a living income. If a job can’t pay better than that, then it’s not a job worth having. Why doesn’t the Bank think about how to design jobs that pay enough to attract workers into the labour market rather than trying to calculate how low welfare benefits have to be to force workers into jobs that shouldn’t exist in the first place?

The concept note says: “there will be a need for labor market institutions that better balance workers’ protections and adaptability” (Para 92). This old chestnut again, really? It’s not the 1980s any more. Why doesn’t the Bank try NOT assuming that protected workers are inflexible workers? Has it ever occurred to it that a guarantee of rights and a voice at work might make workers MORE willing to be adaptable and not less? If the Bank can’t recognize that this just makes sense, then we can point it in the direction of lots of evidence.

The note says: “relaxing regulations that make it easier for firms to manage human resources, especially low-income workers, [is a] possible policy option” (Para 92). Why is the Bank so coy? If it means that it might be a good idea to allow businesses greater freedom to hire and fire the most poorly-paid workers, why not come right out and say it and take the flak that will deservedly come its way afterwards.

The concept note says policy makers should “consider how governments can spur productivity while addressing distributional tension.” (Para 97). First of all, why doesn’t the Bank avoid euphemisms like ‘addressing distributional tension’ and use honest phrases that actually mean something like ‘reducing inequality’ or ‘tackling corporate greed’ or ‘taking action to fight injustice in the labour market’. We like the last one best. Second, why doesn’t the Bank think about whether ‘addressing distributional tension’ could actually be the best tool to increase productivity? If workers know they will get a fair share of bigger earnings they are more likely to cooperate with employers to make it happen.

None of this is rocket science. If you’re looking for evidence that unionisation and collective bargaining are compatible with economic success you don’t need a huge complicated study of the research literature. All you have to do is look at those economies where a high proportion of workers have pay and conditions set via collective bargaining and ask yourself, ‘are these economies basically working?’ There’s a handy graphic with this info on page 40 of this ILO report. The list of countries with high bargaining coverage is hardly a rogue’s gallery of the world’s most troubled economies: Austria, Belgium, Sweden, Australia, France, Germany… And it’s not just the ‘global north’ either. Uruguay and Mauritius have very high bargaining coverage but also thriving economies, with GDP per capita among the very highest in their regions. Of course all of these countries have had their economic ups and downs and of course they are not free of problems, but they are proof that the kind of collective industrial relations that leads to decent standards of living and decent working conditions is perfectly compatible with global competitiveness.

The World Bank’s most basic ideas about how economies work say none of this should be happening. But rather than recognising the facts and going back to the drawing board they’re still trying the old favourite neoliberal solution of trying to make the world fit their model. The Bank is the kind of organization that likes to say that it has no politics and that it is only interested in ‘what works’. Well, WB people, it’s time to face the fact that your economic models are a fantasy. So can we focus on what’s real?